Rs 250,000 cr bulk deposits up for renewal, rates may be hiked

Interest rates on bulk deposits are expected to shoot up as about Rs 250,000 crore of bulk deposits, out of a total Rs 5,000,000 crore in the system, come up for repricing during this quarter. Banks are vying with each other to widen their deposit base after the Reserve Bank of India (RBI) warned them not to fund credit through the repo window or the call money market. The problem will be aggravated further in the March quarter, when there is a 30 per cent to 40 per cent higher concentration of fixed deposits, as banks contract a higher amount of deposits to show a higher topline growth. About Rs 180,000 crore of bulk deposits mature every month, according to treasury heads of leading banks. A bulk deposit is any deposit over Rs 1 crore. K.R.Kamath, CMD of Punjab National Bank, said the bulk deposits form about 22.43 per cent of their deposit base. “The rates on these deposits could go up if there is a good credit demand in the fourth quarter. We do not have a bunching of bulk deposits, every month we have a portion maturing,” said Kamath. A senior SBI official who deals with revenue and resource management said the total deposits of the banking system is estimated to be around Rs 5,000,000 crore, which includes the current accounts, savings account, retail term deposits and bulk deposits. “About 35 per cent of this is Casa and the remaining Rs 3,250,000 crore are term deposit of which bulk deposits would be Rs 2,275,000 crore. Term deposits are spread out in the 12 months of the year, which works out to roughly about Rs 180,000 crore maturing every month,” said the official.